United States District Court, E.D. Michigan, Southern Division
Kevin L. Dougherty, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
Esperion Therapeutics, Inc., et al., Defendants.
Steven Whalen, U.S. Magistrate Judge.
OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO
DISMISS PLAINTIFFS' AMENDED COMPLAINT
J. Tarnow, Senior United States District Judge.
the Court is a securities fraud class action against
Esperion, a clinical stage pharmaceutical company, and its
Chief Executive Officer, Tim M. Mayleben. Plaintiffs, a class
of investors who purchased Esperion common stock between
August 18, 2015 and September 28, 2015, allege that
Defendants violated §§10(b) and 20(a) of the
Securities Exchange Act of 1934 and SEC Rule 10b-5
promulgated thereunder. The underlying question that drives
this dispute is whether FDA approval of ETC-1002,
Esperion's lead product, requires Esperion to conduct a
cardiovascular outcomes trial (“CVOT”) to assess
the drug's lipoprotein cholesterol-lowering efficacy in
patients who suffer from certain types of cardiovascular
allegedly made false statements to Plaintiffs about what
occurred at an August 2015 meeting between Esperion and the
U.S. Food and Drug Administration (“FDA”), and
failed to disclose material facts about the development of
ETC-1002, a medication designed to lower elevated levels of
lipoprotein cholesterol (“LDL-C”). Esperion's
deceit regarding its business, according to Plaintiffs,
operated as a fraud and caused Plaintiffs to transact in
Esperion common stock at artificially inflated prices.
Essentially, “[h]ad Plaintiffs . . . known the truth
regarding the problems that Esperion was experiencing, which
Defendants did not disclose, Plaintiffs . . . would not have
transacted in Esperion common stock.” (Compl. ¶
argue that Plaintiffs' action is a “fraud by
hindsight” case, exactly the kind that the Private
Securities Litigation Reform Act (“PSLRA”) was
designed to prevent. They characterize this as a “knee
jerk lawsuit by opportunistic plaintiffs whenever a
company's stock price drops.” (Dkt. 30, Defs.'
Br. at Pg. ID 580). Defendants ask the Court to dismiss the
Complaint for three reasons: 1) there can be no strong
inference of scienter when Plaintiffs have not alleged that
Defendants knew that any statements were materially false or
misleading when made; 2) Plaintiffs have not specified why or
how any statements were misleading when made; and 3)
Defendants' statements were forward-looking and therefore
immune from liability under the PSLRA.
Court will GRANT Defendants' Motion to Dismiss. The PSLRA
imposes strict pleading requirements that Plaintiffs have
failed to satisfy. The Court finds that Plaintiffs have not
stated with particularity any facts giving rise to a strong
inference that Defendants acted with a knowing and deliberate
intent to manipulate, deceive, or defraud. See Frank v.
Dana Corp., 646 F.3d 954, 959 (6th Cir. 2011).
Furthermore, a reasonable person would conclude that the
inference of scienter in this case is not as strong as the
opposing inference of non-culpability. See Tellabs, Inc.
v. Makor Issues & Rights, Ltd., 551 U.S. 308, 326
(2007); Kuyat v. BioMimetic Therapeutics, Inc., 747
F.3d 435, 441 (6th Cir. 2014).
Defendants move to dismiss Plaintiffs' complaint under
Federal Rule of Civil Procedure 12(b)(6), the Court sets
forth Plaintiffs' non-conclusory allegations as fact.
See Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009);
LULAC v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007)
(explaining that the plaintiff's factual allegations,
while “assumed to be true, must do more than create
speculation or suspicion of a legally cognizable cause of
action; they must show entitlement to relief)
(emphasis in original).
regulates drugs and the drug development process under the
Federal Food, Drug, and Cosmetic Act (“FDCA”).
Before a drug is marketed in the U.S., a drug sponsor, such
as Esperion, must, among other things, complete nonclinical
laboratory tests and submit a New Drug Application
(“NDA”) to the FDA. Navigating the approval
process requires the expenditure of substantial time and
financial resources. The process is often complex, expensive,
and uncertain, and, depending on how the development of the
product advances, may be subject to delays, limits, or
short lifespan,  Esperion has focused exclusively on
developing and commercializing ETC-1002, an oral, once-daily,
small molecule designed to lower elevated levels of
lipoprotein cholesterol (“LDL-C”) and to avoid
side effects associated with other LDL-C lowering medications
on the market. Though most people use statins
(cholesterol-lowering drugs) to reduce their LDL-cholesterol
levels, statins are known to cause serious side effects and
may interact adversely with other drugs. Esperion
estimates that “2-7 million U.S. adults are intolerant
of statin therapy due to muscle pain or weakness associated
with their use.” (Dkt. 30-2, Defs.' Ex. A at Pg. ID
613). ETC-1002 is designed to provide an alternative
treatment to statin-intolerant individuals, and may also be
used as an add-on therapy for individuals who cannot reach
their recommended LCL-cholesterol goals despite the use of a
statin. Id. at Pg. ID 617.
August 17, 2015 Press Release and Conference Call.
met with the FDA after completing Phase 2b clinical trials
for ETC-1002 in August 2015. It subsequently issued a press
release on August 17, 2015, in which it provided updates on
the ETC-1002 development program. The press release contained
the following relevant statements:
. LDL-C remains an acceptable clinical surrogate endpoint for
the approval of an LDL-C lowering therapy such as ETC-1002 in
patient populations who have a high unmet medical need,
including patients with heterozygous familial
hypercholesterolemia (“HeFH”) or clinical
atherosclerotic disease (“ASCVD”), who are already
taking maximally tolerated statins yet require additional
LDL-C reduction and where there is a positive benefit/risk
. Based on feedback from the FDA, approval of ETC- 1002 in
the HeFH and ASCVD patient populations will not require the
completion of a cardiovascular outcomes trial (CVOT).
. The Company continues to plan and initiate a CVOT prior to
NDA [“New Drug Application”] filing to pursue
broader label indications related to cardiovascular disease
final section of the press release informed readers that
“[f]orward-looking statements involve risks and
uncertainties that could cause Esperion's actual results
to differ significantly from those projected, including . . .
the risk that FDA may require additional studies or data
prior to approval that might cause approval to be
delayed.” (Dkt. 30-5, Defs.' Ex. D at Pg. ID 640).
It also stated: “Esperion may need to change the design
of its Phase 3 program once final minutes from the FDA
meeting are received.” Id.
held a conference call and webcast with investors on August
17, after issuing the press release, to discuss the contents
of the press release and Esperion's meeting with the FDA.
In his opening remarks, CEO Mayleben confirmed that the FDA
had determined that “LDL cholesterol lowering remains
an acceptable clinical surrogate endpoint for the potential
approval of a therapy such as 1002.” (Dkt. 30-6,
Defs.' Ex. E at Pg. ID 644). He also assured participants
that the company's commitment to conducting a
cardiovascular outcomes trial . . . remains intact, ”
both for commercial purposes and “for the broader label
indications related to cardiovascular disease risk reduction
that can be achieved.” Id. at Pg. ID 645. He
noted that Esperion “expect[s] to initiate the CVOT
late next year or in early 2017 such that the CVOT will be
underway by the time of our NDA submission.”
Id. Several minutes later, Mr. Mayleben stated,
“[w]e know that 1002 will not require a CV outcomes
trial to be completed prior to approval in patients with
heterozygous FH and ASCVD, those patient populations that FDA
considers to have an appropriate benefit/risk ration.”
Id. When discussing his thoughts about the Phase 3
program, Mayleben said that “the long-term potential
here is the second step, which is to be able to complete and
report out a positive CV outcomes trial.” Id.
at Pg. ID 649. Throughout the call, Mayleben emphasized that
the company could not comment in depth until it received the
final minutes from the FDA; in response to one analyst's
question, he said that Esperion has “zero interest in
front running the FDA on this. The FDA's minutes are the
only minutes that matter, and so we're going to wait for
those minutes.” Id. at Pg. ID 652.
September 28, 2015 Press Release and Conference Call
received the FDA's End-of-Phase 2 final meeting minutes
on September 28, 2015, and promptly issued a press release
with an update on the ETC-1002 development program. Esperion
declared “[the] FDA has encouraged the Company to
initiate a cardiovascular outcomes trial promptly, which
would be well underway at the time of the New Drug
Application submission and review.” (Dkt. 30-7,
Defs.' Ex. F at Pg. ID 657) (emphasis added).
convened another conference call and webcast for investors
later that day. CEO Mayleben began the call by telling
participants that Esperion's “commitment to
initiating a cardiovascular outcomes trial and having it well
underway at the time of NDA submission remains intact.”
(Dkt. 30-8, Defs.' Ex. G at Pg. ID 663). Mayleben also
Historically and most recently, LDL has been an approval
surrogate marker for LDL-cholesterol-lowering drugs. What
happens in the future, I think is, it is something that we
will find out along with the rest of the world as this
dynamic therapeutic area continues to evolve.
Id. at Pg. ID 665.
response to a question regarding the need for a completed
cardiovascular outcomes trial prior to FDA approval, and the
inconsistency in language between the two press releases,
Mayleben explained, “we're trying to . . . balance
the . . . history of using LDL-cholesterol as an accepted
surrogate . . . with what the future may be given the fact
that there are at least 4 CV outcomes trials ongoing now that
will certainly read on whether LDL remains an accepted
surrogate.” Id. at Pg. ID 666. Mayleben also
repeatedly emphasized that the development of ETC-1002
“is a very dynamic therapeutic area.”
Id. at Pg. ID 665.
market reacted negatively in the days following
Esperion's September 28 press release and conference
call. The company's stock price fell from $35.09 per
share to $18.33 per share; Plaintiffs say that this is a
“one-day decline of 48% on massive volume of 9.9
million shares, or almost 8 times the average daily trading